JThe New

PhRMA Code

and the

Potential Benefits of Compliance

10 Pro Te: Solutio Pro Tro Tro e Te T : Solutio 11

This Code is to reinforce our intention that our interactions with healthcare professionals are professional exchanges designed to benefit pa-tients and to enhance the practice of medicine. This Code is based on the principle that a healthcare professional’s care of patients should be based, and should be perceived as being based, solely on each patient’s medical needs and the healthcare professional’s medical knowledge and experience.” 3

The general tone of the Code is summed up by Section 13 which states that: “Noth-ing should be offered or provided in a man-ner or on conditions that would interfere with the independence of a healthcare pro-fessional’s prescribing practices.”4 The Code is voluntary, but urges all pharmaceutical companies to adopt procedures that reflect its provisions. PhRMA will list on its website all companies that agree to follow the Code and certify annually that they have in place the necessary procedures and policies. As of November 5, 2008, thirty six pharmaceuti-cal companies, including many major phar-maceutical companies, are listed on the

website. Thus, the Code is effectively becom-ing the industry standard for ethical behav-ior between healthcare professionals and pharmaceutical companies.

The enactment of this Code offers an op-portunity for pharmaceutical companies to be proactive in avoiding or mitigating any inves-tigations by either state or federal Offices of Inspector General or in qui tam actions. At qui tam actions. At qui tamfirst blush, the Code does not seem to be use-ful in defense of products liability actions, but upon deeper reflection, compliance with the Code may prove useful there as well.

Provisions of the Code5

Meals and Gifts to Physicians. Company representatives may present information to a healthcare professional during his or her working day and can provide modest meals during the presentation, provided the meal is in a setting that allows information to be pre-sented. Presentations by “field sales represen-tatives or their immediate managers” should be confined to the office or hospital.6 Spouses or other guests should not be included.

Offering meals where no company repre-sentative is present (dine and dash) is “not appropriate.”7

No entertainment or recreational item, even one of minimal value, may be given to any healthcare professional who is not a sala-ried employee of the company. This prohibi-tion extends to healthcare professionals who are speakers or consultants to the pharma-ceutical company.8 Similarly, the Code pro-hibits providing items that “do not advance disease or treatment education — even if they are practice-related items of minimal value (such as pens, note pads, mugs, and other similar ‘reminder’ items with company or product logos).”9 These also include items intended for the personal use of the health-care professional, such as floral arrangements or music CDs.10

Unless prohibited by law, companies may offer, on an occasional basis, items worth $100.00 or less and that are designed primarily to educate and which only have a value to the healthcare professional in his or her professional duties. For example, an

Junkets to fabulous resort locations. Lucrative consulting agreements. Tickets to sporting events. The proverbial

“free lunch.” These and similar practices have long been perceived by the public as the norm in the relationship be-

tween pharmaceutical companies and the medical profession that prescribes their products. In response to increasing

scrutiny,1 the Pharmaceutical Research and Manufacturers of America (PhRMA) has issued new ethics guide-

lines, the Code on Interactions with Healthcare Professionals (“Code”).2 Its preamble sets forth the guiding principle:

JThe New

PhRMA Code

and the

Potential Benefits of Compliance

10 Pro Te: Solutio Pro Tro Tro e Te T : Solutio 11

This Code is to reinforce our intention that our interactions with healthcare professionals are professional exchanges designed to benefit pa-tients and to enhance the practice of medicine. This Code is based on the principle that a healthcare professional’s care of patients should be based, and should be perceived as being based, solely on each patient’s medical needs and the healthcare professional’s medical knowledge and experience.” 3

The general tone of the Code is summed up by Section 13 which states that: “Noth-ing should be offered or provided in a man-ner or on conditions that would interfere with the independence of a healthcare pro-fessional’s prescribing practices.”4 The Code is voluntary, but urges all pharmaceutical companies to adopt procedures that reflect its provisions. PhRMA will list on its website all companies that agree to follow the Code and certify annually that they have in place the necessary procedures and policies. As of November 5, 2008, thirty six pharmaceuti-cal companies, including many major phar-maceutical companies, are listed on the

website. Thus, the Code is effectively becom-ing the industry standard for ethical behav-ior between healthcare professionals and pharmaceutical companies.

The enactment of this Code offers an op-portunity for pharmaceutical companies to be proactive in avoiding or mitigating any inves-tigations by either state or federal Offices of Inspector General or in qui tam actions. At qui tam actions. At qui tamfirst blush, the Code does not seem to be use-ful in defense of products liability actions, but upon deeper reflection, compliance with the Code may prove useful there as well.

Provisions of the Code5

Meals and Gifts to Physicians. Company representatives may present information to a healthcare professional during his or her working day and can provide modest meals during the presentation, provided the meal is in a setting that allows information to be pre-sented. Presentations by “field sales represen-tatives or their immediate managers” should be confined to the office or hospital.6 Spouses or other guests should not be included.

Offering meals where no company repre-sentative is present (dine and dash) is “not appropriate.”7

No entertainment or recreational item, even one of minimal value, may be given to any healthcare professional who is not a sala-ried employee of the company. This prohibi-tion extends to healthcare professionals who are speakers or consultants to the pharma-ceutical company.8 Similarly, the Code pro-hibits providing items that “do not advance disease or treatment education — even if they are practice-related items of minimal value (such as pens, note pads, mugs, and other similar ‘reminder’ items with company or product logos).”9 These also include items intended for the personal use of the health-care professional, such as floral arrangements or music CDs.10

Unless prohibited by law, companies may offer, on an occasional basis, items worth $100.00 or less and that are designed primarily to educate and which only have a value to the healthcare professional in his or her professional duties. For example, an

Junkets to fabulous resort locations. Lucrative consulting agreements. Tickets to sporting events. The proverbial

“free lunch.” These and similar practices have long been perceived by the public as the norm in the relationship be-

tween pharmaceutical companies and the medical profession that prescribes their products. In response to increasing

scrutiny,1 the Pharmaceutical Research and Manufacturers of America (PhRMA) has issued new ethics guide-

lines, the Code on Interactions with Healthcare Professionals (“Code”).2 Its preamble sets forth the guiding principle:

There is every reason to believe that compli-ance with the 2008 Code — which provides for more stringent restrictions on the rela-tionship between healthcare professionals and the pharmaceutical industry — will be even stronger evidence of a good faith effort to comply with federal program requirements and the anti-kickback provisions.

Moreover, the Guidance states that an ef-fective compliance program must have the “support and commitment of senior man-agement and the company’s governing body.”23 Because the 2008 Code requires cer-tification by both the Chief Executive Officer and Chief Compliance Officer that the PhRMA code is being followed, a compli-ance program operating in accordance with the Code evidences senior management com-mitment to compliance. This evidence could prove important in an OIG investigation.

The Guidance specifically states: “[I]n large part, a pharmaceutical manufacturer’s com-mitment to an effective fraud and abuse compliance program can be measured by its commitment to training and monitoring its sales force.”24 Following the Code’s require-ments of written compliance policies and procedures, training and education of em-ployees, internal monitoring and auditing, and enforcing standards through disciplinary guidelines will provide evidence of compli-ance with the Guidance.25

A qui tam action might allege that a phar-maceutical company has induced false claims by encouraging doctors to prescribe drugs off-label.26 Pointing to a strong compliance program that follows the Code and audits of sales rep/physician interactions can only help in the defense of such claims.

Evidence of compliance in defense of products liability actions.

A favorite theme in pharmaceutical prod-uct liability litigation is that the company “puts profits over health and safety.” One way to blunt such an allegation is to show that the company’s sales representatives and market-ing department comply with the Code in all their interactions with healthcare personnel. Compliance can provide evidence that no in-ducements were made to healthcare profes-

sionals to prescribe a particular drug for a particular patient. Evidence of compliance can impress upon the jury the importance the company places on high ethical standards in its relationships with healthcare profes-sionals. Many courts will allow testimony as to an industry standard of conduct, and evi-dence of compliance with that standard can be used to rebut negligence claims.27 Evi-dence that a company adheres to the Code should be allowed where plaintiff alleges im-proper influence on physicians.

Compliance with the Code might prove most helpful in rebutting punitive damage claims. Although such evidence would not be conclusive, “[s]uch information may certainly bear on whether a party’s behavior represents such an extreme departure from accepted standards of care as to justify puni-tive damages.”28

ConclusionFollowing the Code will be a concrete way

for a pharmaceutical company to demon-strate its commitment to ethical behavior in its dealings with healthcare professionals. As noted by a recent article in The New York Times, “proponents welcome [the Code] as a step toward ending the barrage of drug brands and logos that surround, and may subliminally influence, doctors and pa-tients.”29 Although the creation of goodwill may be reason enough to adhere to the tenets of the Code, adherence may also prove a use-ful tool in the defense of actions filed against the pharmaceutical company.

1 See e.g. IMS Health Incorporated, et al., v. Ayotte, 490 F. Supp.2d 163 (D. N.H. 2007); rev’d (1st Cir., slip opinion 11/18/08) for an unflattering description of the detailing process and the relationship between pharmaceutical companies and healthcare professionals.2 The Code on Interaction with Healthcare Professionals can be found on the PhRMA website .3 Code on Interaction with Healthcare Professionals, p. 2 (emphasis added).4 Id. at 13.5 It is not the intent of this article to set forth all the provisions of the Code, but a summary of some of its highlights will be useful. The reader is referred to the Code itself which contains a narrative as well as a very helpful question and answer section for all of its provi-sions as well as a list of the pharmaceutical companies that have signed on to it.6 Id. at 4.

7 Id. at 5.8 Id. 9 Id. at 11.10 Id. at 12.11 Id. at 12, 18.12 Id. at 6.13 Id.14 Id. at 7.15 Id. at 8.16 Id. at 9. This would presumably include training on no off-label promotion of a drug. 17 Id. at 10.18 Id. at 14.19 Id. at 14-15. 20 Although this document is voluntary guidance and is not binding on the pharmaceutical manufacturers, it can only be beneficial to a company faced with the potential for an OIG investigation to have followed this guidance.21 The anti-kickback statute can be found at 42 U.S.C. §1320a-7b(b)(2). It makes it a crime to pay a healthcare provider to order or prescribe something for which there may be payment under a federally supported healthcare program.22 68 Fed. Reg. 23731, 23737 (May 5, 2003).23 Id. at 23731.24 Id. at 23738-23739.25 Id. at 23731.26 See e.g. United States v. Pfizer, Inc., 507 F. 3d 720 (1st Cir. 2007).27 See e.g. Couch v. Astec Industries, Inc, 53 P.3d. 398,404 (N.M. Ct. App. 2002); McDowell v. Continental Airlines, Inc., 54 F. Supp.2d 1313, 1318 (S.D. Fl. 1999)(plaintiff’s failure to cite any violation of industry guidelines to indicate negligence is relevant); Bansemer v. Smith Labo-ratories, Inc., 1990 WL 132579 (E. D. Wis.) (defendant allowed to amend answer to allow introduction of evi-dence at trial that shows compliance with industry stan-dards); DiCarlo v. Keller Ladders, Inc., 211 F.3d 465,468 (8th Cir. 2000)(evidence of compliance with industry standards relevant to design defect claim); Carroll v. Otis Elevator Company, 896 F. 2d 210,217 (7th Cir. 1990)(jury cannot be told that industry standards are not relevant); Kuntz v. Lamar Corporation, 385 F. 3d 1177, fn.2 (compliance with national electric code is prima facie evidence of the absence of negligence but can be rebutted).28 American Cyanamid Co. v. Roy, 498 So. 2d 859, 863 (Fla. 1987); see also Columbini v. Westchester County Healthcare Corporation et al., 808 N.Y.S.2d 712,715-716 (N.Y. App. Div. 2005); Horne v. Owens-Corning Fiber-glass Corp., 4 F. 3d 276,281-282 (4th Cir. 1993)(evidence of compliance with industry standard should have been admitted into evidence).29 Singer, Natasha, “No Mug? Drug Makers Cut Out Goodies for Doctors”, The New York Times, December 31, 2008, A1.

Pro Te: Solutio 13

anatomical model used for patient educa-tion is acceptable, but an item used primarily for patient treatment — such as a stetho-scope — is not.11

Continuing Medical Education. A pharma-ceutical company is not to fund continuing medical education in any manner other than direct funding to the CME organization. “The company should not provide any ad-vice or guidance to the CME provider, even if asked by the provider, regarding the con-tent or faculty”12 of any program. A company cannot directly sponsor a meal at the CME.13 Similar guidelines apply to third-party edu-cational or professional meetings.14

Consultant agreements and speaker programs. Companies should ensure that consultant ar-rangements are not “rewards” for a physician’s prescribing practices. Any compensation or reimbursement should be reasonable and

based on market value. The Code also lists various factors intended to avoid token agree-ments used to justify compensating health-care professionals for their time or their travel expenses. Those factors include, inter alia, whether there is a written contract that speci-fies the nature of the services, whether a legiti-mate need exists for the service, and whether the venue for any meetings with consultants is conducive to the advisory services, e.g., “[r]esorts are not appropriate venues.”15

Similarly, any healthcare professionals who speak to other healthcare professionals about a company’s medicines should be selected based on their reputation, knowledge, and skills in a particular area of medicine. Such speakers can be compensated and reimbursed for their expenses, but only if they received “extensive training” on the drug and other topics to be presented. They must also be

trained as to “FDA regulatory requirements for communications.”16 Again, speaker train-ing should not be conducted at resorts.17

Adherence to Code. The Code requires that pharmaceutical companies take affirmative steps to ensure compliance by the company and its employees. Sales representatives are specifically addressed; all pharmaceutical representatives who visit healthcare profes-sionals should receive training about appli-cable laws, regulations, and industry codes of practice — including the Code — that deal with their interactions with healthcare professionals. Additionally, companies should have a procedure to periodically assess sales representatives’ compliance with standards of conduct, and the company should take appropriate action when the representative fails to comply.18

If a company publicly states that it will abide by the Code and certifies annually that it has procedures in place to encourage com-pliance, it will be listed on the PhRMA web-site. This certification must be signed by the Chief Executive Officer and Chief Compli-ance Officer. Companies are urged to seek external verification of their compliance poli-cies at least every three years.19

Compliance as a defense in government investigations or qui Tam actions.

In 2003, the Office of Inspector General in the Department of Health and Human Services issued its Compliance Program Guid-ance for Pharmaceutical Manufacturers, 68 Fed. Reg. 23731 (May 5, 2003) (“Guid-ance”). The purpose of the compliance pro-gram is to promote internal controls in the pharmaceutical industry to help reduce fraud and abuse in federally funded healthcare pro-grams.20 The Guidance addresses the rela-tionships between pharmaceutical companies and healthcare providers and the federal anti-kickback provisions.21 The Guidance specifi-cally recognizes the 2002 PhRMA Code on Interactions with Healthcare Professionals and provides that compliance with the PhRMA Code “will substantially reduce the risk of fraud and abuse and help demonstrate a good faith effort to comply with the applicable federal healthcare program requirements.”22

Written by meliSSA BAltz

12 Pro Te: Solutio

The general tone of

the Code is summed

up by Section 13 which

states that: “Nothing

should be offered or

provided in a manner

or on conditions

that would interfere

with the indepen-

dence of a healthcare

professional’s pre-

scribing practices.”

q q

There is every reason to believe that compli-ance with the 2008 Code — which provides for more stringent restrictions on the rela-tionship between healthcare professionals and the pharmaceutical industry — will be even stronger evidence of a good faith effort to comply with federal program requirements and the anti-kickback provisions.

Moreover, the Guidance states that an ef-fective compliance program must have the “support and commitment of senior man-agement and the company’s governing body.”23 Because the 2008 Code requires cer-tification by both the Chief Executive Officer and Chief Compliance Officer that the PhRMA code is being followed, a compli-ance program operating in accordance with the Code evidences senior management com-mitment to compliance. This evidence could prove important in an OIG investigation.

The Guidance specifically states: “[I]n large part, a pharmaceutical manufacturer’s com-mitment to an effective fraud and abuse compliance program can be measured by its commitment to training and monitoring its sales force.”24 Following the Code’s require-ments of written compliance policies and procedures, training and education of em-ployees, internal monitoring and auditing, and enforcing standards through disciplinary guidelines will provide evidence of compli-ance with the Guidance.25

A qui tam action might allege that a phar-maceutical company has induced false claims by encouraging doctors to prescribe drugs off-label.26 Pointing to a strong compliance program that follows the Code and audits of sales rep/physician interactions can only help in the defense of such claims.

Evidence of compliance in defense of products liability actions.

A favorite theme in pharmaceutical prod-uct liability litigation is that the company “puts profits over health and safety.” One way to blunt such an allegation is to show that the company’s sales representatives and market-ing department comply with the Code in all their interactions with healthcare personnel. Compliance can provide evidence that no in-ducements were made to healthcare profes-

sionals to prescribe a particular drug for a particular patient. Evidence of compliance can impress upon the jury the importance the company places on high ethical standards in its relationships with healthcare profes-sionals. Many courts will allow testimony as to an industry standard of conduct, and evi-dence of compliance with that standard can be used to rebut negligence claims.27 Evi-dence that a company adheres to the Code should be allowed where plaintiff alleges im-proper influence on physicians.

Compliance with the Code might prove most helpful in rebutting punitive damage claims. Although such evidence would not be conclusive, “[s]uch information may certainly bear on whether a party’s behavior represents such an extreme departure from accepted standards of care as to justify puni-tive damages.”28

ConclusionFollowing the Code will be a concrete way

for a pharmaceutical company to demon-strate its commitment to ethical behavior in its dealings with healthcare professionals. As noted by a recent article in The New York Times, “proponents welcome [the Code] as a step toward ending the barrage of drug brands and logos that surround, and may subliminally influence, doctors and pa-tients.”29 Although the creation of goodwill may be reason enough to adhere to the tenets of the Code, adherence may also prove a use-ful tool in the defense of actions filed against the pharmaceutical company.

1 See e.g. IMS Health Incorporated, et al., v. Ayotte, 490 F. Supp.2d 163 (D. N.H. 2007); rev’d (1st Cir., slip opinion 11/18/08) for an unflattering description of the detailing process and the relationship between pharmaceutical companies and healthcare professionals.2 The Code on Interaction with Healthcare Professionals can be found on the PhRMA website .3 Code on Interaction with Healthcare Professionals, p. 2 (emphasis added).4 Id. at 13.5 It is not the intent of this article to set forth all the provisions of the Code, but a summary of some of its highlights will be useful. The reader is referred to the Code itself which contains a narrative as well as a very helpful question and answer section for all of its provi-sions as well as a list of the pharmaceutical companies that have signed on to it.6 Id. at 4.

7 Id. at 5.8 Id. 9 Id. at 11.10 Id. at 12.11 Id. at 12, 18.12 Id. at 6.13 Id.14 Id. at 7.15 Id. at 8.16 Id. at 9. This would presumably include training on no off-label promotion of a drug. 17 Id. at 10.18 Id. at 14.19 Id. at 14-15. 20 Although this document is voluntary guidance and is not binding on the pharmaceutical manufacturers, it can only be beneficial to a company faced with the potential for an OIG investigation to have followed this guidance.21 The anti-kickback statute can be found at 42 U.S.C. §1320a-7b(b)(2). It makes it a crime to pay a healthcare provider to order or prescribe something for which there may be payment under a federally supported healthcare program.22 68 Fed. Reg. 23731, 23737 (May 5, 2003).23 Id. at 23731.24 Id. at 23738-23739.25 Id. at 23731.26 See e.g. United States v. Pfizer, Inc., 507 F. 3d 720 (1st Cir. 2007).27 See e.g. Couch v. Astec Industries, Inc, 53 P.3d. 398,404 (N.M. Ct. App. 2002); McDowell v. Continental Airlines, Inc., 54 F. Supp.2d 1313, 1318 (S.D. Fl. 1999)(plaintiff’s failure to cite any violation of industry guidelines to indicate negligence is relevant); Bansemer v. Smith Labo-ratories, Inc., 1990 WL 132579 (E. D. Wis.) (defendant allowed to amend answer to allow introduction of evi-dence at trial that shows compliance with industry stan-dards); DiCarlo v. Keller Ladders, Inc., 211 F.3d 465,468 (8th Cir. 2000)(evidence of compliance with industry standards relevant to design defect claim); Carroll v. Otis Elevator Company, 896 F. 2d 210,217 (7th Cir. 1990)(jury cannot be told that industry standards are not relevant); Kuntz v. Lamar Corporation, 385 F. 3d 1177, fn.2 (compliance with national electric code is prima facie evidence of the absence of negligence but can be rebutted).28 American Cyanamid Co. v. Roy, 498 So. 2d 859, 863 (Fla. 1987); see also Columbini v. Westchester County Healthcare Corporation et al., 808 N.Y.S.2d 712,715-716 (N.Y. App. Div. 2005); Horne v. Owens-Corning Fiber-glass Corp., 4 F. 3d 276,281-282 (4th Cir. 1993)(evidence of compliance with industry standard should have been admitted into evidence).29 Singer, Natasha, “No Mug? Drug Makers Cut Out Goodies for Doctors”, The New York Times, December 31, 2008, A1.

Pro Te: Solutio 13

anatomical model used for patient educa-tion is acceptable, but an item used primarily for patient treatment — such as a stetho-scope — is not.11

Continuing Medical Education. A pharma-ceutical company is not to fund continuing medical education in any manner other than direct funding to the CME organization. “The company should not provide any ad-vice or guidance to the CME provider, even if asked by the provider, regarding the con-tent or faculty”12 of any program. A company cannot directly sponsor a meal at the CME.13 Similar guidelines apply to third-party edu-cational or professional meetings.14

Consultant agreements and speaker programs. Companies should ensure that consultant ar-rangements are not “rewards” for a physician’s prescribing practices. Any compensation or reimbursement should be reasonable and

based on market value. The Code also lists various factors intended to avoid token agree-ments used to justify compensating health-care professionals for their time or their travel expenses. Those factors include, inter alia, whether there is a written contract that speci-fies the nature of the services, whether a legiti-mate need exists for the service, and whether the venue for any meetings with consultants is conducive to the advisory services, e.g., “[r]esorts are not appropriate venues.”15

Similarly, any healthcare professionals who speak to other healthcare professionals about a company’s medicines should be selected based on their reputation, knowledge, and skills in a particular area of medicine. Such speakers can be compensated and reimbursed for their expenses, but only if they received “extensive training” on the drug and other topics to be presented. They must also be

trained as to “FDA regulatory requirements for communications.”16 Again, speaker train-ing should not be conducted at resorts.17

Adherence to Code. The Code requires that pharmaceutical companies take affirmative steps to ensure compliance by the company and its employees. Sales representatives are specifically addressed; all pharmaceutical representatives who visit healthcare profes-sionals should receive training about appli-cable laws, regulations, and industry codes of practice — including the Code — that deal with their interactions with healthcare professionals. Additionally, companies should have a procedure to periodically assess sales representatives’ compliance with standards of conduct, and the company should take appropriate action when the representative fails to comply.18

If a company publicly states that it will abide by the Code and certifies annually that it has procedures in place to encourage com-pliance, it will be listed on the PhRMA web-site. This certification must be signed by the Chief Executive Officer and Chief Compli-ance Officer. Companies are urged to seek external verification of their compliance poli-cies at least every three years.19

Compliance as a defense in government investigations or qui Tam actions.

In 2003, the Office of Inspector General in the Department of Health and Human Services issued its Compliance Program Guid-ance for Pharmaceutical Manufacturers, 68 Fed. Reg. 23731 (May 5, 2003) (“Guid-ance”). The purpose of the compliance pro-gram is to promote internal controls in the pharmaceutical industry to help reduce fraud and abuse in federally funded healthcare pro-grams.20 The Guidance addresses the rela-tionships between pharmaceutical companies and healthcare providers and the federal anti-kickback provisions.21 The Guidance specifi-cally recognizes the 2002 PhRMA Code on Interactions with Healthcare Professionals and provides that compliance with the PhRMA Code “will substantially reduce the risk of fraud and abuse and help demonstrate a good faith effort to comply with the applicable federal healthcare program requirements.”22

Written by meliSSA BAltz

12 Pro Te: Solutio

The general tone of

the Code is summed

up by Section 13 which

states that: “Nothing

should be offered or

provided in a manner

or on conditions

that would interfere

with the indepen-

dence of a healthcare

professional’s pre-

scribing practices.”

q q